Thursday
In a government planned and controlled economy, the resultant disasters can be delayed and hidden for a long time, but not forever.
It is now almost 14 months since our imbecilic governments began to close down ‘their’ economies. There was very little fuss about that at the time, because, generally speaking, the electorate is also daft – note the I.Q. of the politicians that they elect. I do not mention that in order to be rude, but because it is a part of the explanation for what has happened and for the consequences that are to come.
For much of my business life (my first business was begun in 1958), we have been living through a bifurcation of the economy. On the one hand, the price of consumer goods continued to drop as interest rates (falling since 1981) continued to put downward pressure on prices and destroy ever more capital in the process. On the other hand, everything that was and is run directly by government or significantly controlled by the same entity, saw major rises in prices (think electricity, water and infrastructure). Where government monopolies are concerned, market forces (reality) do not apply.
Two other price factors are now emerging to view.
The first, is that the price of consumer goods is likely to become less relevant before the end of 2021. If you don’t have a job, or if you feel that you might lose your job, then you are not interested in a new fridge or laptop, no matter how cheap it is. And they are going to be very cheap indeed. Container ships, bulging with goods, are log-jamming the waterways and ports of the world as optimistic businesses re-build their inventory. Governments and media have convinced them that the economy is on the verge of a major recovery.
It is not.
The second, is that the price of food has its own momentum, which has little to do with central planning or demand. There is currently a supply problem. According to the UN, world food prices just rose for the tenth consecutive month. A major drought in the western part of the US, if it does not soon break, will ensure that they continue to rise. Unlike with fridges or laptops, food demand tends to be fairly constant. People like to eat regularly, even when they don’t have a job. Falling supply will create very big problems in those households that do not carry stocks of food. We live in a world of linear extrapolators. People who believe that what was yesterday and what is today will be what it will be tomorrow. To suggest otherwise must be either a conspiracy or paranoia. I did mention that, generally speaking, they are a bit daft.
I will state my position without equivocation; the world economy cannot be artificially sustained forever by fake asset prices, low interest rates and borrowed ‘money’. There is an end point to such jiggery-pokery and we will see the beginnings of that end before the conclusion of 2021.
The chances of an outbreak of hostilities in the Middle East rise with each passing hour. That will disrupt energy supplies. If the price of fuel rises, then the price of everything rises. That would be on top of the aforementioned price rises.
There is one other price that has to be paid. The social costs attendant to electing politicians are inversely proportional to their average I.Q. level.
The world could be on the verge of a catastrophe of historic proportions.